Small Self Administered Scheme  

How 'flexible' schemes proved their resilience

How 'flexible' schemes proved their resilience

Small self-administered schemes have proven themselves to be “powerful” pension products during times of adversity, specialists have claimed.

Richard Mattison, director of Ssas provider Whitehall Group, said the biggest trend which emerged from 2020 was how resilient Ssas products had been through the Covid crisis.

Although Ssas are a complicated product, they also come with lots of flexibilities which make them "powerful", Mr Mattison said.

He added: “Back in 2006 when the A-Day regulations were introduced, the general view was that the end of Ssas was just around the corner. In fact, the opposite happened and it grew slowly and steadily in popularity.

“All those added features which were considered redundant became the armour plating that made Ssas undefeated as the premier retirement savings vehicle in the UK.”

Throughout the Covid crisis, Ssas have been used by advisers to help their clients gain access to much needed funds for their businesses.

FTAdviser reported in April that due to the product’s unique loanback facility, many providers saw the number of Ssas registrations significantly increase during the first national lockdown.

For example, Whitehall Group said Ssas registrations in the first 10 days of April alone were almost eight times higher than figures reported for January.

A Ssas can provide loan finance back to a connected business, up to 50 per cent of the total amount of cash held and the net market value of the scheme’s assets. 

HM Revenue & Customs rules state loans made to the sponsoring employer will qualify as an authorised payment as long as five key tests are met, including: a five-year minimum term; interest rates must be at least 1 per cent above the current bank base rate; and the loan cannot be more than 50 per cent of the Ssas’ net assets.

Provider focus

In addition, lockdown saw advisers and savers take the opportunity to sort out their finances, with many taking a closer look at which providers they were using.

This in turn caused Ssas providers to experience a significant uptick in the amount of pension switches being pushed through.

A Ssas pension switch, otherwise known as a takeover, involves the transfer of a Ssas pension from one provider to another and the re-registration of investments to include the new professional trustee, which is often the provider itself.

A lack of flexibility from legacy providers is one reason why some clients decided to look into newer propositions.

Mr Mattison lockdown caused many challenges for Ssas providers due to them operating such complicated products.

Mr Mattison said: “Without a doubt 2020 will be remembered as a spectacularly difficult year. One where unexpected challenges arose at every turn and the phrase ‘wading through treacle’ did not do it justice.

“One of the fundamental points about operating a Ssas business is that it is not simple.

“The very nature of the product means it is complicated and is best operated by small groups in close proximity where knowledge, experience and understanding can be passed around at speed.”